For the majority, recycling and looking after our planet is something that is important to us – so something that should be considered equally as important is the standards of the companies that individuals invest in.
World Earth Day serves as a great opportunity for investors to reflect on their investment strategies and consider their environmental impact.
In recent years, there has been a major uptake in awareness and desire to drive positive change from investors via their investments – This has translated into an increase in investments directed towards companies that are profitable, whilst actively working to reduce their environmental footprint. Investors therefore play an integral part in promoting sustainable business practices.
For investors, investing in ESG or ethical funds really means making investment decisions that align with their values by gaining insights into a company’s risk management practices and its ability to adapt to changing societal expectations and regulations as well as by evaluating its long-term sustainability and profitability.
What is ESG investing?
First and foremost, ESG stands for environmental, social and governance. It’s an approach to investing that evaluates organisations based on their ethics as a company, not just on their ability to make a financial return.
Although Ethical investing is a highly broad term covering a vast range of topics, what it boils down to it, it really and truly means to choose investments based on their moral behaviour – not just their pattern for financial gain.
Why has ESG investing become so popular?
The history and patterns of Ethical investing goes back more than a hundred years, although more widely known in the last five years as it’s gained widespread traction, prompted by the rise of the climate emergency and campaigners such as Greta Thunberg.
Because of the spotlight placed on ESG investing, companies have had to increase their focus and attentions onto an ESG agenda in order to remain competitive, whilst offering the best service to clients.
How can your pension affect ESG?
Ethical investing really gives investors the opportunity to dig deep behind a company’s corporate, social responsibility values, and uncover the structures and processes that make them ‘green’.
When you first start paying into your employer’s pension, your contributions, along with employer contributions and tax relief, will be invested through a default fund. You will usually have several fund options to choose from.
Increasingly, as well as investing green, new research has identified that people are specifically choosing employers based on their ‘green pensions’ [1]. Today’s workers expect employers to show true leadership and offer pensions which are invested responsibly.
Demonstrating a genuine commitment to environmental, social, and governance (ESG) priorities is not only the right thing to do for the planet, but it could also be a game changer for attracting and retaining the best talent.
Business leaders have a real opportunity to show staff that they are serious about doing the right thing.
Many companies remain unaware of how their current employee pension schemes can undermine the progress they are making to develop more sustainable operations, primarily due to sizeable investments in high ESG-risk sectors such as coal, oil sands and tobacco.
Ethical investing
To learn more about how ethical investing, or to discuss your options, please get in contact with a member of our team here.
[1] Make My Money Matter, FTSE100 Research, September 2022
April 2023
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This message may contain information that is confidential or privileged. If you are not the intended recipient, please advise the sender immediately and delete this message. Kingswood, Kingswood Group and Kingswood Institutional are trading names of KW Wealth Planning Limited (Companies House Number: 01265376) regulated by the Financial Conduct Authority (Firm Reference Number: 114694) and KW Investment Management Limited (Companies House Number: 06931664) regulated by the Financial Conduct Authority (Firm Reference Number: 506600) with a registered office at 10-11 Austin Friars, London, EC2N 2HG. KW Investment Management Limited is also regulated in South Africa by the Financial Sector Conduct Authority (Firm Reference Number: 46775). Both companies are wholly owned subsidiaries of Kingswood Holdings Limited which is incorporated in Guernsey (registered number: 42316) and has its registered office at Mont Crevelt House, Bulwer Avenue, St. Sampson, Guernsey, GY2 4LH. April 2023.
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